After a full year of rising LCD TV panel prices, the natural effect of rising prices on both supply and demand has kicked in, and prices are starting to fall, based on our latest update and forecast of LCD TV prices. The demand surge, which resulted from the COVID-19 pandemic, has eased and industry supply has caught up to demand. Prices in August and September are falling faster than expected and we now forecast that year-end prices will be lower than they were in December 2020, but still substantially higher than their all-time lows.

In our summer updates, we referred to a series of events that suggested slowing demand and increasing supply, and recent developments have only confirmed this outlook. The increasing panel prices have led to an unprecedented increase in TV prices in the US, which will hinder demand. After nearly a year where component shortages and logistics problems had brands and retailers scurrying to find enough supply, the brands and retailers have caught up. Best Buy’s recent earnings release indicated that the company has more than $2B in additional inventory compared to last year, with expectations for demand flat to down Y/Y. For emerging regions, the path of the pandemic continues to suggest a headwind for global TV demand, as emerging economies are still struggling with COVID and suffering an economic slowdown.

The first chart here highlights our latest TV panel price update, showing the biggest price increases in the history of the flat panel display industry, with prices increasing across the board from a low in May 2020 to a high point in June or July of 2021 and then a decline to December 2021. The peak prices in June/July 2021 reached levels last seen in July 2017.

LCD TV Panel Prices January 2020 - December 2021

We estimate that smaller TV screen sizes (32” up to 55”) peaked in June while the largest sizes (65” and 75”) peaked in July. Smaller screens saw the largest increases in the up cycle, with sizes made efficiently on Gen 10.5 (65” and 75”) having the smallest increases. In August, prices for all TV panel sizes fell, with the biggest percentage declines occurring for the smallest sizes. The average price decline in August across the seven sizes we track was 9.4%, and 32” panels declined almost 15%. We expect that prices will continue to fall rapidly in September, with an average price decrease of 8.6%.

For the third quarter of 2021, prices will decline for all panel sizes, but the biggest declines will happen for the smaller sizes. We expect that 75” LCD TV panel prices averaged over the third quarter will be only 0.6% lower than the second quarter, but price declines for 32”, 40” and 43” will exceed 10% Q/Q. Even with severe price declines in August and September, 32” panel prices will remain more than 100% higher than their all-time lows of May 2020.

As we look at pricing on an area basis, we have noted that smaller screen TVs are the most commoditized: prices for 32” panels fall the fastest during a period of oversupply and rise the fastest during a period of shortage. We see that pattern repeating again as oversupply kicks in. At the peak of the recent upswing, the smallest TV panels sold with an area premium, but the shift to oversupply is causing that pattern to flip, as shown in the next chart.

Monthly Area Prices per Square Meter for TV Panels, October 2016 - December 2021

Whereas in May 2020, 75” panels sold at an area premium of $77 per square meter higher than the 32” panel price, as of July 2021, they were selling at a $56 discount on an area basis. This means that those Gen 10.5 fabs could earn higher revenues from making 32” panels than from 75” panels. The pattern for 65” is even more severe, and in June, 65” was selling at a $67 per square meter discount (alternately, a 21% area discount) compared to 32”.

In the second half of 2021, though, we are seeing 32” TV panel prices falling fastest, with a 42% decline between June and December 2021, while 75” TV panel prices decline 20% from their mid-year peak. We expect a crossover point in October, where area prices are in a tight range, but by the end of the year, we expect that area prices for the largest panels will have a premium of about 10% over 32” panels.

The last chart here shows our TV price index, set to 100 for prices in January 2014, and the Y/Y change of LCD TV panel prices. Our index increased from its all-time low of 42 in May 2020 to 87 in June 2021, but this represented the peak and prices have already fallen to 78 in August. We now expect the index to decline to 56 at year-end, lower than in December 2020, but still 34% higher than in May 2020. The Y/Y increase surpassed 100% in May and June 2021 but is falling dramatically in the second half. We now expect LCD TV panel prices in November 2021 to be down Y/Y, and prices in December 2021 will be 16% lower than last year.

TV Panel Price Index and Y/Y Change, January 2015 - December 2021

Based on their most recent financial reports, TV makers continued to make strong profits in Q2 2021, despite high panel prices. The top four global TV brands (Samsung, LG, Sony and TCL) reported a combined $1.6B in operating profits in the business units for TV, on revenues of $13.6B, with both figures increasing Y/Y. All four companies were solidly profitable in Q2, and all indicated that they expect to be profitable in the second half. None of the four companies commented on a decline in flat panel display prices, but lower prices for the primary component in a TV will surely drive profits even higher for the TV brands.

With the COVID-19 demand surge assisted by shortages in glass and DDICs, we saw a historic year of increases in panel prices, and for the first time ever, this led to TV prices increasing. We have seen panel makers post robust profits for the second quarter of 2021 and although we now see prices declining in Q3, the prices at their current levels remain substantially higher than costs. Even price declines in Q4 will sustain high profitability for LCD panel makers, who continue to be in line for record full-year profits.